Tired of paying high rent to ensure a comfortable standard of living but short on funds to buy your own home? Well, a home loan can prove instrumental in realising your dream of buying a home. Today, accessing housing loans has become easier than ever before, with the best banks offering competitive interest rates, easy eligibility criteria and minimal paperwork.
However, before you go ahead with your loan application, it’s important to do some research and compare between different options. Besides, to help you, here’s a list of five things that you must consider before applying for a loan.
- Total Rate of Interest
When you are checking out your options, make sure to also check for the overall property loan interest rates. Doing a bit of research and comparing different options will guide you to a bank that offers a rate of interest on home loans that is as low as 6.90%.
- Affordable EMIs
The interest rate will determine the minimum installment amount you will need to pay as EMI to repay the loan. So, look at how much you can afford as EMI each month. Ideally, your loan EMIs should not exceed 40% of your total income. You can do this by making a list of all your essential expenses, such as electricity bills, rent, groceries, etc. Also make a list of discretionary expenses, such as eating out. This will help you with your expenses better. You never know, you might just be able to repay the loan before time. But make sure there are no penalties for doing so. You can use a home loan prepayment calculator to understand this better.
3. Loan Repayment Tenure
Before you finalise a home loan, make sure to check the maximum tenure of repayment. Usually, the EMI is lower for a longer tenure. On the other hand, the interest rate will increase the amount to be repaid with a longer duration of repayment. Also check whether the bank provides you the facility to get your tenure shortened, if required, allowing you to pay off your loan early. Remember to get an estimate of the early payment with an online home loan prepayment calculator so that you have an idea of how much you need to pay.
4. Credit Score History
Having a good credit score makes it easy to get approved for your desired loan amount. A high credit score makes you a lower-risk borrower for the bank. Therefore, they will check your CIBIL score before approving your application. You can improve your score by ensuring you pay all your credit card bills and other loan EMIs on time.
5. Balance Transfer Facility
The facility to transfer your balance is another aspect that you must consider while choosing a lender. This feature allows you to transfer your debt to another provider, offering a lower interest rate. Also, make sure to find out how much fees the bank will charge for the transfer.
A housing loan is a great financial tool and can help you realise your dream of owning a property. However, if you are a first-timer, make sure to do your homework to make an informed decision.